What is the objective of stabilisation in economic policy?

• A. Increase Inflation
• B. Stabilise the Economy to Achieve Sustainable Economic Growth and Improve Living Standards
• C. Eliminate All Government Debt
• D. Maximise Short-Term Profits

Answer: (B)

Stabilisation in economic policy is about smoothing the economy’s fluctuations so that growth can be sustainable and living standards rise. By using tools like interest rates, government spending, and taxes, policy aims to keep inflation low and stable while supporting employment. When the economy overheats, policy cools demand to prevent high inflation; when demand weakens, policy stimulates activity to reduce unemployment. This balance helps households plan, invest, and save with less uncertainty, leading to steadier, longer‑term improvements in living standards.

The other ideas don’t fit as well: aiming to increase inflation isn’t desirable, since stability and moderate prices are the goal; eliminating all government debt isn’t the objective of stabilization and isn’t realistically attainable in itself; and maximizing short-term profits is a microeconomic aim, not the macroeconomic aim of stabilisation.